Health of Wealth - September 2024

1. Gold continues to SHINE the BRIGHTEST

Gold has roared ~30% in one year. ~6% in one month.

IMPACT: POSITIVE

Gold Prices are up by 6.14% in September 2024 alone. As of 7-Oct-2024, Gold has hit a fresh all time high of Rs 78,700 per 10 grams. With the current global economic landscape, gold prices are poised to rise.

Here are the key drivers for Gold’s Expected Future Performance:

Strong Fundamentals:

• Strong Jewellery demand in the overseas market particularly “China”.
• Increase in the domestic demand by stockists and retailers
• Weakening US Dollar

Geopolitical and Economic Factors:

• Escalating geopolitical tensions
• Interest rate cuts environment
• Inflation and recession fears drive investors to gold, boosting its appeal as a safe-haven asset.

Supply-Side Dynamics

• Central Banks are accumulating Gold
• Lack of new Gold Discoveries
• Falling Gold Production

The combination of these factors has solidified gold's position as a safe haven asset and are driving prices to record highs.

2. India’s Inflation is Under Control so far in 2024!

A trend of Moderation in consumer price index in 2024.

IMPACT: POSITIVE

In August 2024, India’s inflation rate was recorded at 3.65%, a modest rise from the previous month data i.e. 3.6% in July, the lowest rate since August 2019. While this slight increase exceeded forecasts of 3.55%, it still marks a continuation of a trend of moderation in inflation, with rates remaining below the Reserve Bank of India’s (RBI) target of 4% for the second consecutive month.

Despite the minor uptick, the sustained low inflation environment indicates overall stability in consumer prices, benefiting households and the economy. This moderation in inflation signals manageable price pressures, allowing consumers to maintain their purchasing power.

3. Health Insurance: What's New from Oct 1, 2024?

IRDAI's reforms in health insurance that are applicable from Oct 1.

IMPACT: POSITIVE

• Effective October 1, 2024, health insurance policies have become more customer friendly. Key developments include reduced waiting periods for pre-existing conditions from 48 to 36 months, and removal of the maximum age limit for buying health plans. Additionally, IRDAI has mandated coverage for mental health, HIV/AIDS, and special conditions.
• Streamlined Claims Process: The reforms also introduce significant changes to the claims process. Insurers cannot deny claims after 5 years, except in cases of fraud. Policyholders can discontinue policies anytime and receive a pro-rata refund. Claims Review Committees will review rejected claims, ensuring transparency. Insurers must collect required documents directly from hospitals and respond to cashless claims within 1 hour.
• Improved Customer Experience: These reforms aim to provide a better claims settlement experience. Policyholders can now increase their sum insured or reduce premiums if no claims are made in a year. With meaningful discounts and streamlined processes, health insurance has become more accessible and customer centric. These changes empower policyholders, ensuring fair and timely claims settlement.

Overall, these changes will drive growth in the health insurance sector, benefiting both consumers and insurers.

4. US Fed Cuts Rates for the first time since 2020

US Fed started shifting the gear from a rate hike cycle and cut 50 bps.

IMPACT: NEUTRAL

In a widely anticipated move, the US Federal Reserve cut interest rates by 0.5% on 18-September-2024. marking its first-rate reduction since 2020.

The current federal funds rate range now stands at 4.75%-5%, effective as of September 2024. Fed sees 2 more 25 basis point rate cuts in 2024, which will take the rate to 4.25-4.5 %. The rate cut is expected to inject liquidity, stimulate borrowing, and boost consumer spending.

A US rate cut can have a significant ripple effect on the Indian market. When the US Fed cuts interest rates, the Reserve Bank of India (RBI) often follows suit, reducing interest rates in India. This decrease in interest rates makes borrowing cheaper, which can boost consumer spending and economic growth.

The Fed has hinted at several more rate cuts until 2025, which will keep global markets on edge.

5. Unprecedented Surge in China’s Equity Market

Chinese Equity Market Surges 17% in September on Stimulus & Rate Cuts.

IMPACT: NEUTRAL

China's Equity Market witnessed an extraordinary surge in September, with the Shanghai Composite Index soaring 17% - its largest monthly gain since 2015.

Key Drivers of the Market Rally:

The rally was fueled by a combination of government stimulus measures and aggressive rate cuts to boost its slowing economy.

• Monetary Policy Easing:As per “The People’s Bank of China”, cutting the Reserve Requirement Ratio RRR), will inject around $141.7 billion into the financial market, providing long-term liquidity. This move will benefit 150 million people across the country, reducing the average annual household interest bill by about 150 billion yuan.
• Fiscal Stimulus:Infrastructure spending of 1 trillion yuan $141.7 billion) and Mortgage rate cuts to lower interest rates on existing loans, reducing the average annual household interest bill by 150 billion yuan.

Hence, China's equity market rallied sharply in September, with key indices posting impressive gains: Shanghai Composite (+17.39%), Shenzhen Component (+26.13%), CSI 300 (+20.97%).